Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure

This policy brief by the Climate Policy Initiative examines how National Development Banks (NDBs) can be leveraged to increase financing for climate-smart urban infrastructure. It identifies significant gaps in current NDB mandates and proposes a 12-dimension maturity model to help NDBs optimize their strategic, financial, business, and operational capacities to better support municipalities in implementing low-carbon and climate-resilient projects.

• There is a significant gap between the potential of National Development Banks (NDBs) to finance climate-smart urban infrastructure and their current mandates; only 4% of Public Development Banks are specifically mandated to finance local governments, and even fewer have mandates focused on green infrastructure.
• Climate change poses a substantial financial risk to urban areas, with up to US$ 4 trillion in assets at risk globally. While infrastructure needs are acute, particularly in developing countries and smaller cities, investing in resilience offers a high benefit-cost ratio; the World Bank estimates that US$ 1 trillion in incremental resilience costs in developing countries could yield US$ 4.2 trillion in benefits.
• The document identifies three primary categories of barriers that hinder NDBs from providing climate-smart urban infrastructure financing: policy, legal and regulatory frameworks (such as restrictive legal structures and broad mandates); institutional barriers (including a lack of sectoral expertise and bankable project pipelines); and financial barriers (such as insufficient capitalization and limited access to innovative capital or de-risking instruments).
• The research introduces an NDB Maturity Model consisting of 12 dimensions across four parameters—Strategic, Financial, Business, and Operational—to standardize the measurement of an NDB's ability to finance green urban infrastructure. Maturity is defined by a balance across these parameters rather than strength in a single area.
• To scale up financing, the brief recommends that national ministers take specific actions: Finance Ministers should ensure NDBs have the necessary financial base and mandate; Environment/Climate Change Ministers should align NDBs with Nationally Determined Contributions (NDCs); and Infrastructure and Urban Development Ministers should integrate NDB financing into national visions for development.
• Indonesia's PT Sarana Multi Infrastruktur (Persero) serves as a case study for overcoming financing barriers through the creation of 'SDG Indonesia One'. This integrated project funding platform uses a blended financing scheme—including development, de-risking, and financing facilities—to reduce transactional costs and increase the implementation of bankable, SDG-compliant projects.

APA

Harb, S., Smallridge, D., Hodson, G., Gough, J., & Yang, K. (2021). Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf

Chicago

Harb, Sara, Diana Smallridge, Glen Hodson, Jonathan Gough, and Kristiina Yang. Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure. Climate Policy Initiative, 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf.

Wikipedia

{{cite report |last1=Harb |first1=Sara |last2=Smallridge |first2=Diana |last3=Hodson |first3=Glen |last4=Gough |first4=Jonathan |last5=Yang |first5=Kristiina |title=Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure |publisher=Climate Policy Initiative |date=March 2021 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{harb2021leveraging, author = {Harb, Sara and Smallridge, Diana and Hodson, Glen and Gough, Jonathan and Yang, Kristiina}, title = {{Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure}}, institution = {Climate Policy Initiative}, year = {2021}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }